Australia’s Trade Surplus Swells to Fresh Record as Imports Drop

Australia’s trade surplus rocketed to a fresh record in June as iron ore receipts pushed even higher and a falling international oil price lopped a chunk off imports.

The windfall swelled to A$8 billion ($5.4 billion), a third higher than May’s upwardly revised A$6.2 billion, data from the Australian Bureau of Statistics showed Tuesday. Iron ore sales climbed to A$9.5 billion, almost A$4 billion more than in January. Imports dropped 4% in the month as fuel and lubricants declined, as well as civil aircraft and industrial transport equipment.

But June could mark trade’s peak as iron ore has fallen into a bear market with the end of a supply crunch, due to output resuming in Brazil and Chinese steel mills pulling back from record production. The spot price has dropped to $99.50 a ton, down 20% from the five-year peak hit last month, and is being pummeled as the U.S.-China trade war morphs into a currency battle.

Bulk commodities have been “battered by the rising trade tensions,” Australia & New Zealand Banking Group Ltd. said. The tensions have hit when signs of rising supply are worrying the market, it said, referring to Vale SA’s plan to bring back more of the capacity that was suspended after a dam burst.

The windfall has helped Australia’s government forecast a budget surplus this fiscal year; yet with iron ore’s surge in recent months it may turn out to have already achieved that in the 12 months through June. The nation hasn’t earned more than it spent since before the financial crisis in late 2008.

Another potential milestone could be the economy’s first current-account surplus since the 1970s, with second-quarter data due Sept. 3.